Choking access to drugs

Drug prices are likely to increase as rich countries and their pharma companies squeeze Indian generics out of the market. How can India’s public healthcare stand up to the challenge?

By Latha Jishnu, Ankur Paliwal
Published: Sunday 15 August 2010

Choking access to drugs

Trade agreements with stiff intellectual property protection requirements combined with buyouts of India’s top generics makers by multinationals threaten to deny affordable medicines to millions of poor.

The cost of essential medicines is a major barrier to healthcare, writes LATHA JISHNU. But the Indian government is doing little to control the prices of drugs or promote use of low-cost generics. ANKUR PALIWAL travelled to Rajasthan and Punjab to assess the impact of some recent initiatives to promote generic drugs in the public health system

Udyog Bhavan, the warren of offices that houses the Ministry of Commerce and Industry in Delhi, is as staid as government offices go. But several times in the past year there has been unwonted excitement at its entrance.

A motley group of people, some of them holding placards, has held demonstrations, forcing the authorities to swing into action and cart them off to the nearest police station. Such protests have occurred each time European Union (EU) officials came here to discuss the free trade agreement (FTA) with the Indian government.

Who are these people and why should discussions on an economic agreement between India and the EU worry them? The protesters are people living with HIV/AIDS and cancer, lawyers and international humanitarian organisations such as Medecins Sans Frontieres (MSF). They are worried about the implications of the EU-India FTA, which has a section on intellectual property that threatens to stifle the manufacture of generic medicines in the country. Generic medicines are the cheaper equivalent of innovator products, usually manufactured after the expiry of the patent on the branded drug.

The global interest in the EU-India FTA negotiations—it was kept under wraps till recently—is easily explained. India is the pharmacy of the world because generics made here are used globally by non-profits (the Clinton Foundation, the Bill and Melinda Gates Foundation) to treat patients with lifethreatening diseases such as HIV/AIDS, cancers and other diseases. For instance, over 85 per cent of the 154,000 HIV/AIDS patients MSF treats in 27 countries depend on generics from India, and thanks to competition from Indian generics, the cost of treatment for HIV/AIDS has decreased dramatically in the past decade (see: ‘Indian generics companies slash costs’). In addition, there are government health programmes in over a dozen countries— Brazil, Ecuador and Thailand, for example— that source generics from India.

Leena Menghaney, project manager of MSF’s Access To Medicines campaign in India and one of the protesters picked up by the police last year, said, “How do we treat our patients without India?” It is not only the third largest producer of generics by volume (see: ‘India, a major producer of generic drugs’ on opposite page) but also one of the least expensive drug producers (see: ‘As cheap as it can get’). While the domestic retail market, as per market researcher ORGIMS, is valued at Rs 55,454 crore in 2008- 2009, exports are worth Rs 38,433 crore.

Data exclusivity: a harsher regime

The crux of the problem with the EUIndia FTA is data exclusivity. Unconfirmed reports say that the giant trade bloc is seeking data exclusivity for 10 years but is likely to lower it to five years after the usual bargaining in the negotiations. But why is data exclusivity such a feared beast? It is a new type of intellectual property right (IPR) that goes beyond what is mandated in the World Trade Organisation’s TRIPS agreement— like the new-fangled IPR enforcement measures, such as the Anti-counterfeiting Trade Agreement (ACTA), pushed aggressively by Organisation for Economic Co-operation and Develop-ment (OECD), the club of rich nations.

Data exclusivity is intended to extend the exclusive rights of innovator companies more than patents would, by not allowing the drug regulatory authorities to rely on test data already in their possession for subsequent approval of generic versions of the drug. For instance, if an innovator company submits data related to the new use, such as for paediatric use, of an old drug, the company is then assured a further monopoly even if the medicine is not protected by a patent. “This will destroy the benefits of section 3(d) of the Patents Act, which does not allow any patents on improvements of medicines such as paediatric versions,” points out a patent attorney.

This would be a double whammy for Indian generic makers because exclusive rights on pharmaceutical data would prevent drug regulatory authorities from relying on test data in their possession for subsequent approval of generic drugs. What it means is that generic versions of a medicine cannot be registered for that period unless the manufacturer carries independent tests showing the safety and efficacy of the drug. Given the limited finances of generic firms and the time required for clinical trials to generate such data, the result would be no generics.

Worse, even non-patented drugs would face such barriers, creating a market monopoly for innovator firms.

The EU-India FTA also seeks to equate ‘data protection’ with ‘market exclusivity’, a provision with lethal implications for the generics industry in India. The draft FTA proposes that “any information submitted to obtain a marketing authorisation” will “benefit from a (yet to be determined) period of protection against unfair commercial use starting from the date of grant of marketing approval”. Net result: no generic equivalent will be allowed to enter the market unless the subsequent applicant submits independent data (or data used with authorisation of the right holder). Analysts point out this goes well beyond what Article 39.3 of the TRIPS Agreement requires. These concerns have been voiced even by the European Parliament’s working group on innovation, access to medicines and poverty related diseases.

Yet, not everyone agrees this is the most lethal of threats confronting the industry. D G Shah, secretary general of the Indian Pharmaceutical Alliance (IPA), said, “The FTAs do not appear to be a major concern for the pharmaceutical industry because it is well drilled in the minds of the bureaucrats that concession for IPRs is different from concession for goods. The MFN (most favoured nation) status accorded under the TRIPS requires that all countries are given the same treatment as parties to the FTAs.” In other words, they would be careful not to make IPR concessions that would apply to all WTO members. This is a surprising change in stance for IPA, which represents 15 of the top generics makers and has expressed misgivings about the FTAs being negotiated with the EU and Japan. But Shah says the new comfort is based “on the assurances given by the commerce secretary and the stand taken by India on these agreements”.

Are MNCs the bigger threat?

So where does the real threat lie? According to Shah, the greater challenge comes from the MNC agenda for protection and enforcement of IPRs. “Many in the government still think that equity and fairness demand we must protect IPRs at all costs. They, therefore, endorse the concept of border enforcement, without adequate safeguards. The customs are not equipped to handle the nuances of IPR violations,” he said. Shah was referring to the series of seizures made by certain EU countries of shipments of Indian generics to third countries, particularly in Africa and Latin America, 2008 onwards. These seizures made by the EU—under Regulation (EC) No 1383 of 2003—are being used by drug MNCs to target shipments of Indian generics to needy nations.

“The State must not take the responsibility of the right holders. However, in the name of consumer protection and fairplay, some argue that this distinction is illogical,” said Shah. Indian generic companies with exports close to Rs 40,000 crore in 2008-09 could find themselves seriously constrained by such initiatives.

Not everyone believes the threats are all external. Amit Sen Gupta, who works for the Centre for Economic and Social Studies in Delhi, is of the view the dangers are closer home. Sen Gupta, also general secretary of the All India People’s Health Network, points out that the fundamental issue is the neglect of public health by the government; its budget for health is four per cent of the GDP. “I do agree that the FTAs and the campaign to impose TRIPS-plus conditions on the generics industry need to be countered. But the most detrimental factor is the abysmal government outlays on health. Because of this the public health system does not absorb the manufacturing cost of medicines,” Sen Gupta said. In Sen Gupta’s view this makes for a rigged generics market. “The biggest barrier to access to medicines is that less than 10 per cent of the medicines are absorbed by the public health system and close to 80 per cent of the out-of-pocket expenses incurred by the poor, are on medicines,” he said.

Acquisitions, mergers

Most industry watchers tend to agree with Sen Gupta’s view but say none of the threats can be termed as lesser or greater. For Reji K Joseph, consultant with RIS (Research and Information System for Developing Countries), a Delhi think tank funded by the Ministry of External Affairs, a serious danger is the increasing buyouts of leading Indian generic companies by the global drug giants. In fairly quick succession, Indian companies have been bought out by foreign firms, raising the question whether we would have an industry left to protect. Leading generics maker Ranbaxy, vaccine manufacturer Shantha Biotechnics, and the injectables business of Orchid Chemicals and Pharmaceuticals have all gone to foreign drug majors (see box: ‘Going, going...’).

What does this imply apart from higher medicine prices? Joseph warns this is a potent issue for the health security of the country, a view echoed by K M Gopakumar, legal adviser to Third World Network, a think tank on North- South policy issues. “The share of patented drugs will increase as acquisitions and mergers become the trend. This will create dependency on MNCs, and we will be back to the pre-1970s situation (before the generics industry took off in India),” Gopakumar said.

This is far from being the complete list of threats looming over the generics industry. Among other concerns are proposed enforcement measures like ACTA, which although aimed ostensibly at a wide range of fake products from software and Internet applications to pharmaceuticals, clearly has the latter in its sights. Michael Geist, a professor at the University of Ottawa who is a staunch critic of the ACTA process, was quoted by IP Watch as saying that at “the end of the day, ACTA is about Brazil, India and other emerging economies”.

Global research organisations and non-profits like Knowledge Ecology International and civil society activists warn ACTA could have a profound effect on access to medicines and has the potential to criminalise manufacturers of active pharmaceutical ingredients (APIs), who provide the critical foundation for the generics industry.

It is obvious that generics firms need to guard their flanks from onslaughts of various kinds, and from every possible angle. But for Shah and a host of others, the biggest challenge to the industry and the patient is from the implementation of the Patents Act, 1970, which India amended in 2005 to allow products patents. Notwith standing section 3(d), which excludes a number of products not patentable in India, Shah points out that a large number of patents have been granted which are prima facie violative of the law. “There is intense pressure on the government to amend the Act to dilute patentability norms. The courts, too, are facing the heat (see: ‘Pharma giants challenge Indian laws’ on the opposite page). One wonders how long the executive and the judiciary will stand up to the multinationals and fight for patients.” How long indeed.

India, a major producer of generic drugs

  • US $84 BILLION: The worth of global generics market in 2009 
  • US $19 BILLION: India’s generics production India ranks third worldwide by volume, but is 14th largest by value



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